Far from its meme-trading days, AMC Entertainment (NYSE:AMC) is weighing its options amid a large long-term debt load of about $4.6 billion. Unfortunately, ticket sales have been frustratingly lackluster lately. A lack of exciting new film releases this year is also adding pressure for AMC stock.
This past Friday, the company’s senior lenders held a call to discuss efforts to “bolster the company’s balance sheet,” according to insiders. Per a Bloomberg report, people familiar with the matter stated that AMC is weighing options on how to tackle its debt. The deliberations are “at an early stage and no final decision has been made.”
According to Bloomberg, the lenders have previously met. However, a heightened urgency now exists in the discussions because of the “weak slate of movies” expected for 2024. Adding to the woes are movie ticket sales in the U.S. and Canada, which are still below pre-pandemic levels.
Efforts to Revive AMC Stock Have Fallen Flat
A major dilemma for AMC stock is what would happen if it does nothing to address the core liability. Without a debt restructuring, reports Bloomberg, the company’s “repayment obligations will balloon in 2026,” when $3 billion of its total obligation will be due.
AMC got into this hole to “fund an acquisition spree that created the world’s largest cinema chain.” But that decision has now put it in a precarious position. As of the quarter ended December 2023, the company held $884 million in cash and equivalents. Still, its free cash flow was in the red for 2023, coming in at a loss of $445 million. While that is an improvement over the FCF loss of $848 million in 2022, AMC’s slow revenue growth is a perplexing challenge.
In 2023, AMC posted revenue of $4.81 billion. While that was up from the $3.91 billion in 2022, it’s still down sharply from the $5.47 billion AMC posted in 2019.
To be fair, AMC CEO Adam Aron isn’t taking this matter lying down. Aron has been creative in terms of courting retail investors. Previously, the executive has met with investors for “exclusive screenings at theaters” and sold “limited-edition popcorn buckets,” among other intiatives.
Still, the efforts have fallen flat. During the meme-stock phenomenon, AMC traded for as high as $450 (or a split-adjusted price of more than $700). Now, shares trade for roughly $4.10 apiece.
Why It Matters
On TipRanks, analysts have a consensus moderate sell rating for AMC stock, which is a clear indictment. This assessment breaks down as four holds, three sell ratings and significantly no buy recommendations.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
